Fed Announces QE4: $45 in Treasuries, Targets 6.5% Unemployment

The FOMC announced new policy measures: monthly buys of $45 billion of treasuries, substituting Operation Twist that ends at the end of the month. This joins the $40 billion in MBS, making it a total of $85 billion. Unemployment limit 6.5%, as long as inflation expectations remain under 2.5% for the upcoming year or two.

The numerical thresholds are a surprise. Currencies rock and roll but haven’t chosen a direction yet. Ben Bernanke will hold a press conference at 19:!5 GMT.

the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.

The market is still digesting these numbers. As usual, one member, Jeffrey M. Lacker, dissented, as he disagreed with both the asset purchase program and the new guidance.

— Updates coming —

Background

In September, the Fed announced QE3, also called “QE-Infinity”: monthly buys of Mortgage Based Securities, without any limit. This joined the ongoing “Operation Twist”, that is worth $45 billion a month. Operation Twist comes to an end at the end of the month / year.

Expectations stood on an announcement of more outright purchases to replace the twist.

In addition, some had expected that Fed to change the guidance towards future rate moves: so far, the Fed had a guidance of keeping rates low until 2015. Several FOMC members suggested that this guidance should be tied to economic goals, such as keeping rates low until unemployment drops below 7% and as long as inflation remains under 3%.

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Yohay Elam – Founder, Writer and Editor
I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me.
Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.
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